Life cycle costing. Advantages, disadvantages and criticism of this procedure

Sustainability is developing in as important target for an increasing number of industries and governments. Especially in a faster moving world, which is determined by quarterly period reports, a long term orientation can be a competitive advantage for unlisted companies.

In the 1960´s the US Department of Defense began to develop a tool to handle increasing costs. They recognized that the purchase price was not the only important criteria. Training or maintaining costs had to be considered for the total cost calculation, too. However, several definitions of Life cycle costing (LCC) exist that tend to be similar: ’monitoring the cost incurred throughout a product’s life cycle’ (Woodward, 1997) or ‘LCC is the sum of all costs incurred during the life cycle of a building, system or product. It includes the costs of the project, development, and acquisition, operation, conservation and maintenance and salvage value if it exists.’ (Goralczyk, and Kulczycka, 2005). In the following essay several functions of life cycle costing will be drawn up. Furthermore, advantages, disadvantages and criticism of this procedure will be analyzed.